Shares in Colt Telecom have jumped more than 7% on renewed speculation that British Telecommunications (BT) is considering buying the beleaguered alternative telecoms carrier, in a rare sign of hope in telecoms M&A activity.

The news will keep bankers at Merrill Lynch and Cazenove busy. The firms are corporate brokers to BT. It will also be of interest to Morgan Stanley, which is a close adviser to Colt and a broker alongside Dresdner Kleinwort Wasserstein.